The beginning of the year is possibly the time when many consumers try to get rid of or lower their debt. Debt consolidation and debt management are ways that California consumers can pay off credit card debt. Which option is more beneficial and what effect does it have on a person’s credit rating?

Debt consolidation loans have been trending among consumers. These loan programs combine all existing debt into one loan. In addition, these loans are usually paid off in installments and can have a positive impact on one’s credit. Consumers can locate these companies online or through their local bank. Since scams are abundant, it’s important to review the company’s background to ensure they are reputable.

On the other hand, debt management programs do not have the option of consolidating loans. The program entails the consumer making one or two monthly payments to a credit counseling agency that pays the debt to the creditors. While enrolled in a debt management program, consumers must close at least most of their credit cards, and this can have a negative effect on their credit score. This may be a suitable option for those who do not have good credit.

Debt consolidation and debt management can be helpful to California consumers who have credit card debt. These programs are designed to help facilitate consumers who wish to pay off their debt quickly and at lower rates. When neither of these programs are suitable to a consumer, bankruptcy may be the most quick and efficient way to eliminate debt and bounce back on one’s feet.

Source: MSN Money, Will debt consolidation help or hurt my credit?, Gerri Detweiler, Dec. 27, 2013